It's ETHCC time, the Ethereum Community Conference where groundbreaking announcements are made. And ahead of the conference, Uniswap Labs has already released their latest protocol, Uniswap X, a game-changing addition to the Uniswap ecosystem. Uniswap X is the missing piece that makes Uniswap the ultimate destination for token swappers.
 In this episode, we have Hayden Adams, the creator of Uniswap, revealing the ins and outs of Uniswap X. This protocol ensures competitive order execution in DeFi, safeguarding swappers from MEV extractors, arbitrageurs, and front runners, so that everyday users can secure the best possible deals. 
 Discover how Uniswap X employs a Dutch auction to maximize returns, while reducing bridge risks and enhancing efficiency in DeFi trading.
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 Timestamps
 0:00 Intro
 4:30 Uniswap is Shipping
 7:30 Decentralizing
 10:25 Competitive Marketplaces
 14:50 What’s New in UniswapX?
 19:30 Value to the Users
 23:08 What is Uniswap Now?
 26:14 Formalizing New Players
 30:55 Pushing the Ecosystem
 36:00 How UniswapX Works
 42:30 User Preferences
 48:30 Changing MEV
 52:45 Cross-Chain Swapping
 1:00:00 Bridge Difficulties
 1:05:45 Harnessing Complexity
 1:09:13 The Beta Launch
 1:14:15 More on the Way
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 Resources
 Hayden Adams:
 https://twitter.com/haydenzadams?s=20 
 UniswapX:
 https://twitter.com/Uniswap/status/1680955621343129600?s=20 
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 Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.
 Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here:
  https://www.bankless.com/disclosures⁠ 

When I think about decentralized finance and what we're trying to achieve, we can't just kind of iterate in our small world.

We have to kind of innovate and push beyond it.

I'm extremely bullish AMMs as a market structure, but I think that there are also other market structures that could exist in the future, and I think we also want to discover them and have them be part of the Uniswap ecosystem.

Bankless Nation, it is that time of year again.

ETHCC, the Ethereum Community Conference in Paris, France.

All the teams, all the projects, all the protocols saved some of their biggest announcements for ECC, except for the ones saving it for permissionless, of course.

You might remember last year, ECC was marked by the time in which 3 teams all had the first ZK EVM.

And today, the day I'm recording this, Sunday, the day before ECC begins, we already have a massive release out of Uniswap Labs.

A brand new protocol called Uniswap X, a new half of Uniswap that complements the rest of the Uniswap protocol, the yin to the yang of Uniswap's v1 through 4.

Something brand new that fills in the picture of the Uniswap project.

Seriously, the best way to describe this is that it's the other half of Uniswap.

It's the half of Uniswap that is meant to make Uniswap the best place for swappers to swap tokens.

Today on the show we have Hayden Adams, the day before he gives his ETHCC main stage talk, releasing UniswapX into the wild.

UniswapX is a protocol for competitive order execution in DeFi.

Is a protocol that exists on top of Uniswaps 1 through

as well as all the other liquidity sources in DeFi, That ensures that the market produces the best possible order execution for anyone looking to swap tokens using UniswapX.

The idea behind UniswapX is that it maximally protects swappers ahead of MEV extractors, ahead of arbitrageurs, ahead of front runners, to ensure that the average Joe, who just wants to swap some tokens, gets the best possible deal that the market will allow for.

In this episode with Hayden, we go under the hood of UniswapX, what it is, how it works, and why it's needed.

So you'll learn about Uniswap X and how it uses a Dutch auction to maximize swapper returns.

How this Dutch auction mechanism also ensures that MEV is maximally retained by swappers.

Also how Uniswap X massively reduces bridge risk and almost entirely abstracts away bridging altogether, freeing up capital to not have to be stuck inside of bridges where it's vulnerable.

And also how UniswapX formalizes a new kind of player in the game of making trading in DeFi maximally efficient.

As a disclosure, of course, Uniswap is a sponsor of Bankless and Bankless also does hold some UNI tokens, which you can see all the details of as well as all of our other disclosures at bankless.com.

So let's go and get talking to Hayden Adams all about this new Uniswap X protocol.

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It is the Sunday before ECC and I'm here with Hayden Adams, who has yet another announcement out of the Uniswap ecosystem.

Hayden Chang, CEO Uniswap, Uniswap Bonjour!

First time in Paris, and first time at ECC.

But yeah, Uniswap, we keep cranking out the hits.

And most recently we announced Uniswap v4, which is a new version of the Uniswap protocol and currently being built in public.

And it basically makes it easier for people to create customized liquidity pools.

And what you start to see is there's this thing called the routing problem.

And as AMMs get more flexible, and basically what happens is routing gets harder over time.

And routing was already actually pretty hard.

So today we have hundreds of thousands of tokens, we have 4 versions of the protocol, we have multiple chains, we have other liquidity sources, and then you also start to think about things like MEV and trade-offs between slippage and latency and best execution.

And definitely with Uniswap V4 and hooks, it actually gets even 1 step more complicated.

And traditionally to date, we have our current open source, we call it the auto router, which optimizes routing across Uniswap V3, V2.

And what we've been working on today, I guess a long build up, is what we call Uniswap X, which is a Dutch auction based protocol for routing and aggregating liquidity.

And we think it's really powerful, and we think it will help provide, it basically improves prices, but also has a bunch of UX benefits, allows for gas-free trading, no slippage on failed transactions, it starts to internalize some MEV, and provides a bunch of other cool features.

I don't know if I should say the other big 1.

Lewis, we'll get to every single bit here.

And for the bankless listeners out there that aren't familiar, ETHCC is the place where you announce things, is where announcements come to be.

Like I said, this is the Sunday before, so we're going to be seeing a slew of announcements coming out, and we're getting the first 1 here with Uniswap X, which is this new thing.

This is the thing that Uniswap is announcing, this thing called Uniswap X.

But I want to actually set more of the stage.

And you did a good job, but I want to make sure that we are talking about the problem being addressed here.

Uniswap is cool because every single token gets its own exchange, gets its own pool.

V3 made it even more complex, if you will, with this concentrated liquidity.

And then, when we had you on not too long ago, like 4 weeks ago or something, about Uniswap V4, that whole thing, Uniswap V4, was even more expressivity in Uniswap pools.

And The big takeaway, I called it Uniswap's hook-centric roadmap to go in parallel with Ethereum's rollup-centric roadmap, where Ethereum's doing this thing where it's pushing complexity to the edges.

It's like, hey, roll-ups, you do all the execution stuff, and we will just settle.

And Uniswap's kind of doing something similar with its hooks and Uniswap v4.

It's, hey, there's a world of expressivity and features and different ways of constructing a pool that we want to enable Uniswap pool builders, AMMs, to be able to build.

And what I think you're leading up to is like, that's all great, we have as much expressivity as we need in Uniswap pools, except we're still left with a bunch of complexity.

Even though it's been pushed to the margins, and Uniswap as a base is simple, the complexity still exists.

And so Uniswap X is a solution to harness all of that complexity, would you say?

Yeah, and I'd say also, when I was on last time, we talked about different ways of achieving decentralization.

And the most pure form of decentralization is automation, and you should automate what you can automate and with immutable smart contracts.

And then the next level of achieving decentralization, and we talked about this more in the lens of governance, but the next level is just like incentivization and markets.

And if you have like a competitive market structure where people are incentivized to do what they should do, then that's more decentralized than something that needs to be governed, which is the third tier.

And for that, you achieve that through just greater distribution of governance rights.

And so, what we're talking about here is taking the routing.

We've already talked about this in the context of the protocol, which is highly decentralized.

And what we're trying to do is do that for the routing problem, which is people tend to think about AMMs as both swapping and routing, as well as liquidity provision, all bundled together.

Routing, swapping, and liquidity provision.

Or well, swapping, how do you route the swaps through liquidity?

But people think of it as like, okay, you have the AMM and you try to find the best price through it.

But I think you can start to unbundle them a bit, right?

Because today, most interfaces have different strategies for how they route through pools, right?

And there's various aggregators, and they're trying to find every possible liquidity source.

There's a Uniswap UI which today basically just has like tries to discover across Uniswap pools.

What we're trying to do here with Uniswap X is create a competitive marketplace for routing.

It's almost a way of achieving more efficiency through decentralization.

The more people that can participate in finding the best routes, discovering the best routes, discovering the best pools, discovering all the different liquidity, the better prices you can get in the long run, if you can create a competitive marketplace.

And so, what we're trying to do with Uniswap X is create a competitive marketplace for routing across liquidity.

And that liquidity can be on-chain, it can be off-chain.

But yeah, that's essentially what we're trying

Creating a competitive marketplace for routing.

So with this explosion, like Uniswap, even at its earliest days in V1, was an explosion of pools.

The cool thing about Uniswap is you can list any token.

And that only got furthered with Uniswap V2, V3, and V4.

So, the routing problem, maybe to define the routing problem, is that with all of these pools and all these different sources of liquidity, getting the best price for your trade is a computational problem, because there's so many pools out there.

I think what you're trying to do with UniswapX, a marketplace for competitive order routing, is you're just giving that up to the market and saying, hey, market, instead of the Uniswap router being the thing that manages all of that complexity, You're just giving it up to the marketplace and allowing routers to come in and service that role to make sure that traders and swappers get the best liquidity, get the best offer.

Yes, and I think the thing I'd add to that is that because we're doing this on a blockchain, it starts to touch on a bunch of other problems in Incubuxy.

We have, you know, you could do this in tradfy, or like you could, if you think about purely in tradfy terms and it's like just like optimizing, you know, routes, but we also deal with things like gas, and then we deal with things like the fact that, you know, validators exist and they get to, you know, choose the order of transactions within a given block, and that starts to take us into what people call.

I guess I only found out recently that it was rebranded from minor extractable value to maximal extractable value.

But then it takes you into MEV territory, gas optimizations and latency, and there's all these other things as well.

Another thing is that there's also another area of price improvement is batching.

If people are trading in the same direction at the same time, if you just route it through a Uniswap pool in the back of the Uniswap pool, then that's less optimal than netting it all together.

By creating a competitive marketplace for it where people are competing in an auction, It basically forces people to find the most sophisticated strategies that offer the most price improvement.

And so sometimes it might mean executing multiple transactions at the same time.

And in that way, you're saving some gas costs and you're also maybe internalizing some of the price improvement for swappers.

But yeah, I mean, the real goal is to deliver value to users at the end of the day.

So, and then the other thing I'll mention is that, again, because we're on blockchains, there's a bunch of UX implications of just like gas.

So, with Uniswap X, orders are off-chain signatures that are then, so rather than signing transactions that are sent directly to the chain, you usually sign off-chain signatures that express their intent, as is a word of the moment in crypto.

And that is sort of an auction, a price-decaying auction.

As soon as the price hits a point where people are willing to fill it, the fillers, a new class participant, are submitting it to the chain.

And those fillers look similar to the block builders of today, and likely will be a lot of overlap, or similar to the trading firms and arbitrageurs.

And because orders just start off as off-chain signatures.

You also get benefits like if your transaction is going to fail, it never gets submitted.

And also just being able to abstract away gas for users.

So if I want to swap USDC for DAI, I don't want to think about ETH as an input.

Today, when you swap USD for DAI, your ETH balance goes down a little bit.

Here, with Uniswap X, you just sign a message, someone else pays the ETH, and that's reflected in the price that you get.

So there's a bunch of other benefits as well, but yeah, there is the first thing you said as well.

So There's a lot of things under the hood there that I want to unpack, like the gas, the MEV, all that kind of stuff.

But really, just to start at the very, very top, how is this different, just to make sure that we're setting the table appropriately, how is this different from a DEX aggregator or some of the other liquidity optimizer services that are out there.

If we take a peek under the hood, how should people think about this in its new form?

Yeah, I'd say that for most DEX aggregators, and for others where there is prior work and there's other teams that are attempting to do things that are categorically similar.

But in terms of the traditional model for a DEX aggregator, what people are doing is just like you have a single team that is integrating liquidity sources 1 by 1.

And in doing that, you're hoping to get as much liquidity coverage as possible.

That was like the kind of traditional DEX aggregator.

It's definitely like various experiments, you know, like CASWAP and Fusion and stuff that get into closer territory to what we're doing with Uniswap X.

But here, rather than trying to manually find all the liquidity sources, here We're basically saying anyone can do that and they're competing against each other and so it's it's a marketplace

It's a little bit more meta than a Dex aggregator So a Dex aggregator

that was a name on the there was a uniswap meta was was 1 name we considered but naming things apart You know And I think Meta kind of ruined it.

So, a DEX aggregator provides a singular solution to getting the best liquidity.

And what you're saying is, in order to improve that product, The teams behind every DEX aggregator needs to serially, manually, 1 by 1, integrate with liquidity pools in order to improve their product.

And what you're saying is Uniswap X is not that.

It is actually a place for all of those solutions to compete in the marketplace.

And maybe at this point, complexity around Uniswap is so large that knowing the correct way of producing the best outcome is perhaps impossible, which is why you need to leave it up to the free market.

And there's also other liquidity sources that can start to be integrated there as well.

I'd also add that signed off-chain order-based auctions are a really powerful primitive.

So if I go to Uniswap, I sign a transaction, I broadcast it to Ethereum, in 12 to 24 seconds, it gets included in the blockchain.

That is the current Uniswap user experience that people are used to.

Yeah, I think that something that's funny is that actually every order, like you already have an auction happening every transaction, right?

Because there's like an auction for Blockspace.

But people are like competing to like, you know, there's like, I'd say that like 1 thing that's interesting is that if you imagine there's like a price curve and then there's a gas price curve, and today like whether or not your order gets included is based purely on the gas price curve, not the asset price curve, and so like this combines everything, like you just have the price curve, like The nice thing is it kind of combines the gas and the price into a single thing, which is part of it.

They're broadcast, and they can be broadcast in a variety of ways.

Signing off-chain orders as opposed to signing a transaction.

People have talked about these for a long time, like meta-transactions or sponsored transactions.

It's like a similar category of things, but we're like bundling the gas auction of getting included in a block with the price auction of trying to optimize your price at the same time.

And so that, you know, there's like a nice efficiency thing there, where sometimes, for example, in the past, and definitely things improved a lot with 1159, EIP-1159, but sometimes in the past, for example, like, you know, the, the, like your transaction would wait until like the gas dropped a significant amount to get included, but in that time, the token that you were selling also dropped.

And so it would have been better for you to pay more gas sooner, but your transaction has no awareness of like, like there's no like, and that's where, when people talk about like MEV awareness, like if the, you know, if the fee that you're paying has no awareness of the transaction that you're doing, then you're really not optimizing.

There's also just a gas, there's a UX benefit.

When I'm trading USDC for DAI, I just don't want to think about ETH.

And it's confusing, and that's something that confuses users a lot.

I think something that maybe makes Uniswap a little bit unique in...

Not totally unique, but like somewhat unique in how we are able to develop and design things is we just have a lot of users and we hear a lot from them.

And some of how we approach solving problems is we're like, okay, what is holding us back today?

Like, what are our users struggling with right now?

And that's part of what led to us creating a wallet, is Our users were struggling with wallet UX and it's part of what led to some of our design decisions here.

It's just like, how do we continue to push things forward?

I want to drill down on this off-chain order thing just a little bit more, because I think it's a great microcosm for the solutions being put forth by Uniswap X as a whole to begin with.

So in Uniswap in its current form, like I said, I sign a transaction, I broadcast that transaction, the gas fee that I pay is hard-coded into that transaction, and that is independent from the trade that I'm making.

And so these are 2 different variables that are not talking to each other, and can produce suboptimal results, because maybe, like you said, the token moves against me, in the time that I tried to save $2 of gas, I lost $15 off my trade.

With signing an off-chain order, which is signing a transaction, but not broadcasting it, and just leaving it for somebody, a filler, a taker to take and fulfill that, they are allowed to combine the computation between optimizing for gas fees and optimizing for the actual swap.

And so they take that complexity and do that computation to produce the best outcome and because it was left off-chain, it was assigned an off-chain order, some sort of off-chain service provider, some filler who's managing this order routing and all the other complexity, they're able to manage the complexity between the gas and the swap to produce a better outcome for a user.

And that's just like 1 piece of many pieces of combined complexity that allows for a better swapping experience.

Something I'll add is that, like, that might be like, oh, there's an off-chain server.

Like, what does that mean for decentralization?

But I think it's worth noting that today, the way it works, It's not actually, there's no magic user signs that go straight to the chain.

We have mempools, we have block builders, we have Infura, we have all of these things in between.

And what we're trying to do is say, let's optimize what's in between to optimize for the best outcomes for users.

Because today, block builders aren't optimizing to give users the most money.

They're optimizing to take the most money for themselves.

And actually, funny enough, a lot of that money is going to ETH holders through efficient MEV auctions.

But so Actually, ETH holders are making a lot of that profit, but we ultimately want to give a lot of that value back to swappers.

We also like UX and value retention by end users.

I also mentioned that I mentioned signed off-chain orders as a general parameter.

I think something that's really powerful with SwapX is it actually opens up a world for cross-chain swapping as well.

So today, we're launching a, or today is, it depends on when this gets.

People can sign up to, or people can opt in in the UI to start having some small percentage of their orders route through this.

It's only for certain pairs, for certain trade sizes, et cetera.

And it's going to, so that we can continue to give time for more fillers to come into the ecosystem and continue optimizing how we parameterize the system.

But starting today, today we'll have a version that's just on mainnet, on Ethereum.

But in the long run, we can really make this cross-chain and you can sign orders that are, this method of signed off-chain orders is really powerful and expressive and allows for really good user experience and efficient cross-chain swapping as well.

And so, not today, but maybe hopefully later in this year, we'll see cross-chain trading, and that will also be really cool.

I want to try and define the landscape of what Uniswap is now.

Because we have on-chain, on Ethereum, and the layer twos.

We have Uniswaps 1 through 4, which are AMMs, and then now we also have Uniswap X, which is an order routing protocol.

This is actually something completely new compared to all the, you know, Uniswap's 1 through 4.

Like The pieces fit really, really well together.

But I really wanted to kind of carve out what the definition is of Uniswap X.

I'm going to do my best, and you can correct me, because I only get so far.

Uniswap X is a protocol, an open-ended protocol for service providers, fillers, trade executors, to come and fulfill the best trade according to the parameters of a swapper.

And so a swapper comes to Uniswap X and they say, hey, I want to do something.

And Uniswap X puts that into a package that fillers can all compete on.

They bundle things in easy-to-manage packages of information so that other service providers, fillers, swappers, liquidity providers, whatever, in the Ethereum ecosystem can all come and compete on that vector of providing that 1 swapper the best swap possible.

And this is, again, complementary with Uniswaps 1 through 4, but is a completely different protocol, correct?

You could start to think of AMMs as ways of creating liquidity, building on top of liquidity as a building block, or there's on-chain integrations, and it's just a really cool, expressive, and efficient on-chain way of providing liquidity.

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UniswapX Revealed: A Game-Changer for DeFi